C.L. Maddox, Inc. v. Coalfield Services, Inc.

• Decision Date: 22 March 1995
• Docket Number: No. 94-2613,94-2613
• Citation: 51 F.3d 76
• Parties: C.L. MADDOX, INCORPORATED, Plaintiff-Appellant, v. COALFIELD SERVICES, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 76

51 F.3d 76

C.L. MADDOX, INCORPORATED, Plaintiff-Appellant, v. COALFIELD SERVICES, INCORPORATED, Defendant-Appellee.

No. 94-2613.

United States Court of Appeals Seventh Circuit.

Argued Feb. 8, 1995.

Decided March 22, 1995.

Donald V. Ferrell, Thomas J. Foster (argued), Jelliffe, Ferrell & Morris, Harrisburg, IL, for plaintiff-appellant.

Thomas F. Crosby (argued), John S. Brewster, Winters, Brewster, Murphy, Crosby & Patchett, Marion, IL, for defendant-appellee.

Before POSNER, Chief Judge, RIPPLE, Circuit Judge, and NORGLE, District Judge. ^*

POSNER, Chief Judge.

The plaintiff, C.L. Maddox, Inc., had on January 18, 1991, made a contract with Zeigler/Old Ben Coal Company that required Maddox to demolish a loading facility in one of the coal company's mines, haul the demolished steel structure to the surface, fabricate a new loading facility for installation underground in the place of the demolished one, and install the new facility. Maddox decided to subcontract all of the job but the fabrication of the new facility. It asked the defendant, Coalfield Services, Inc., whether it would be interested in the subcontract. In February 1991, Coalfield's president met with Maddox's president for a few hours at the site of the mine, and at the end of the meeting he offered to do the job for $230,000. He didn't think it necessary to go underground and inspect the facility, because Coalfield had done this sort of work before. He was confident that, provided his crew was allowed to work around the clock, he could do the job in three weeks, as Maddox wished because of its commitments to Zeigler/Old Ben.

Coalfield's crew traveled to the mine on March 19 and on the same day Coalfield faxed a proposed contract to Maddox. The contract specified a price of $230,000 and completion within three weeks, provided that Coalfield was allowed to work day and night seven days a week. It also required biweekly progress payments based on Coalfield's progress toward completion. There are other provisions but they are of a boilerplate character immaterial to this appeal. Maddox's president called Coalfield's president the same day, requesting the inclusion of a noncompetition clause; this was done by return fax and Maddox's president told Coalfield's president that he would sign the proposal as amended. He never did.

Coalfield's crew began work the next day, March 20. The crew encountered some difficulties in the work and, as the days passed, made slower progress than expected. Coalfield meanwhile was making repeated requests to Maddox to sign the proposal, receiving no replies, and getting nervous. Early in the morning of April 8, Coalfield ordered its crew to stop work and come to the surface with its tools and equipment. A few hours later it faxed Maddox a letter stating that it would not proceed with the work without acceptance by Maddox of the proposed contract and payment of an invoice for $103,500 enclosed with the letter. This was 45 percent of the contract price; Coalfield claimed that its crew was 45 percent of the way to completion of the job.

Maddox replied by fax the same day. Mr. Maddox was apologetic about not having responded to the proposed contract sooner. He said that although according to information he had received from his project superintendent "your 45% completion is a little high, ... we shall in good faith accept the 45% completion figure and pay accordingly less 10% retention." But he appeared to condition this promise on Coalfield's signing an "acceptance letter" that Maddox enclosed. (And there is evidence that Mr. Maddox told Coalfield's president this in a phone conversation.) That letter agreed to most of the provisions in Coalfield's proposal of March 19 but extended the deadline for completion of the work from three weeks to four in recognition of the fact that the crew had not been permitted to work on Sundays after all (because of "union disgruntlement," according to Coalfield's lawyer). Of much greater significance it added a liquidated-damages clause requiring Coalfield to pay Maddox $1,000 for every day that the job took beyond the four-week deadline. Coalfield balked. It had been working for three weeks already and the job was less than half finished. It estimated that completion would take another five or six weeks, which is to say four or five weeks beyond the new deadline fixed by Maddox, implying a potential liability for liquidated damages of $35,000 if it agreed to Maddox's terms. Coalfield faxed a letter back to Maddox on April 8 rejecting the acceptance letter and refusing to complete the project unless Maddox not only paid the $103,500 invoice but also accepted the terms in Coalfield's offer of May 19, with an exception for the date of completion. "The original schedule can not be met due to work stoppages and delays beyond our control, and also because of the unexpected thickness of liners in existing equipment and bins. With no additional delays, the project will take approximately five (5) to six (6) weeks." The letter implicitly acknowledges that Coalfield's action in removing the crew from the underground work site would cause a further delay, for it reads, "if you decide to accept the above conditions, we will proceed with work starting April 16, 1991"--eight days from the date of the fax.

Maddox replied that if Coalfield did not resume work by April 9, it would be in breach of their contract. Coalfield never resumed the work, and Maddox brought this suit, a diversity suit governed by the contract law of Illinois, for the damages it incurred when, Coalfield having abandoned the job midway to completion, Maddox had to pay to have it completed by another contractor in time to avoid a breach of its contract with Zeigler/Old Ben. Coalfield counterclaimed for the contract price multiplied by the fraction of the job that it had completed, the $103,500 (.45 X $230,000).

Both parties moved for summary judgment. Coalfield's motion was based on the surprising ground that it had had no contract with Maddox. The district judge granted Maddox's motion for summary judgment and denied Coalfield's. It held that there had been a contract, as shown by Coalfield's action in performing for three weeks and completing, as it conceded it had, 45 percent of the project, and that Coalfield had broken the contract by walking off the job on April 8. The judge directed Maddox to submit documentation of its damages for Coalfield's breach. Later the judge changed his mind and agreed with Coalfield that he had jumped the gun in deciding that Coalfield had been the one to break the contract. The parties then consented to try the issue before a magistrate judge, who after a bench trial found that Maddox, not Coalfield, had broken the contract. Concerning damages for this breach, the magistrate judge considered himself bound by what he considered to be the finding already made by the district judge that Coalfield had completed 45 percent of the work. He therefore awarded Coalfield the $103,500 that it was seeking for its partial performance of the contract.

Maddox rightly excepts to the magistrate judge's considering himself bound by the district judge's "finding" that the job had been 45 percent completed. It was an assumption rather than a finding. No evidence had been presented that Coalfield had completed 45 percent of the job. There was just Coalfield's concession to that effect, wrested from it during its futile effort to deny the existence of a contract, a concession that ought not bind Maddox. Actually there was some evidence--Maddox's first fax on April 8, in which it agreed to make a 45 percent progress payment (less 10 percent in case the 45 percent estimate turned out to be too optimistic). But this might have been in the nature of a compromise offer, designed to elicit Coalfield's agreement to the new terms in the acceptance letter; or it might have been a mistake. The essential point is that the question of how far Coalfield's work had progressed had not been litigated or determined. It is true that if Maddox in the summary judgment proceeding had used Coalfield's "concession" to establish the existence of a contract, a subsequent attempt to challenge the concession might run afoul of the doctrine of "mend the hold," which limits the right of a party to a contract to take inconsistent positions during the course of litigation over the contract. Harbor Ins. Co. v. Continental Bank Corp., 922 F.2d 357, 362-65 (7th Cir.1990). But Maddox had not done that.

All this would be of no importance if Maddox were correct that not it but Coalfield broke the contract; let us see. To make our analysis intelligible, we have to revisit briefly the question whether there was a contract, although we do not understand either party to be denying anymore that there was. The presidents of the two companies agreed that Coalfield would do the job for $230,000 in three weeks, and Coalfield got to work and had completed a substantial part of the performance when the dispute arose. Was this oral agreement enforceable? Coalfield's partial performance took the contract out of the statute of frauds. Monetti S.p.A. v. Anchor Hocking Corp., 931 F.2d 1178, 1183 (7th Cir.1991). Any suggestion that the parties did not intend it to be a contract, intended rather that no legally enforceable obligations arise until the parties reduced their oral agreement to writing, Quake Construction, Inc. v. American Airlines, Inc., 141 Ill.2d 281, 152 Ill.Dec. 308, 312, 565 N.E.2d 990, 994 (1990); Chicago Investment Corp. v. Dolins, 107 Ill.2d 120, 89 Ill.Dec. 869, 872, 481 N.E.2d 712, 715 (1985), is rendered implausible by the fact that Mr. Maddox had said he would sign Coalfield's proposal, implying agreement to the terms set forth in it. Coalfield's performing a substantial part of its contractual undertaking was further evidence that the parties had a contract, as it is hardly plausible that Coalfield would have done so much...